3. Explain the two fold effects of the following transaction:
1. Mehul started a business with cash Rs.30,000.
2. Opened a bank account in bank of baroda with Rs.25,000.
3. Bought goods from Arvind traders Rs.20,000.
4. Gave a cheque to Arvind Traders on account Rs. 10,000.
5. Sold goods Rs.15,000.
6. Sold goods to jinansh Rs.5,000.
7. Paid shop rent Rs.1,000.
8. A crossed cheque of Rs.2,000 was received from Jinansh.
9. Purchased stationery Rs.500.
10. Received an order for supplying goods from Bharat patel Rs. 10,000.

Answer :

Answer:In accounting, every transaction has a two-fold effect as per the double-entry system. Here's how the transactions you listed affect the business:

1. **Mehul started a business with cash Rs.30,000.**

  - **Increase in Assets (Cash)**

  - **Increase in Owner's Equity (Capital)**

2. **Opened a bank account in Bank of Baroda with Rs.25,000.**

  - **Decrease in Assets (Cash)**

  - **Increase in Assets (Bank Balance)**

3. **Bought goods from Arvind Traders Rs.20,000.**

  - **Increase in Assets (Inventory)**

  - **Decrease in Assets (Cash) or Increase in Liabilities (Accounts Payable if not paid immediately)**

4. **Gave a cheque to Arvind Traders on account Rs. 10,000.**

  - **Decrease in Assets (Bank Balance)**

  - **Decrease in Liabilities (Accounts Payable)**

5. **Sold goods Rs.15,000.**

  - **Increase in Assets (Cash/Bank Balance) or Increase in Assets (Accounts Receivable if sold on credit)**

  - **Increase in Owner's Equity (Revenue)**

6. **Sold goods to Jinansh Rs.5,000.**

  - **Increase in Assets (Accounts Receivable)**

  - **Increase in Owner's Equity (Revenue)**

7. **Paid shop rent Rs.1,000.**

  - **Decrease in Assets (Cash/Bank Balance)**

  - **Decrease in Owner's Equity (Expense)**

8. **A crossed cheque of Rs.2,000 was received from Jinansh.**

  - **Increase in Assets (Bank Balance)**

  - **Decrease in Assets (Accounts Receivable)**

9. **Purchased stationery Rs.500.**

  - **Decrease in Assets (Cash/Bank Balance)**

  - **Decrease in Owner's Equity (Expense)**

10. **Received an order for supplying goods from Bharat Patel Rs. 10,000.**

   - This is not an accounting transaction yet as no exchange has taken place.

Each transaction affects the accounting equation: Assets = Liabilities + Owner's Equity.

Explanation:

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